Warehousing takes a hit
Health & Safety rules are an important part of any business operation. And health comes first. However, the pandemic’s effect in terms of lockdowns, staff shortages, social distancing measures and a variety of new legislation and rules have resulted in delays in warehousing operations resulting in productivity losses in fulfilment operations, reduced processing capacity and additional demand for warehouse real estate.
In fact, the 2021 UKWA report describes Prologis research showing that for every extra £1bn spent online, an extra 775,000 square feet in UK warehouse space is needed to meet rising demand. In fact, a 2020 paper from Savills suggests that for every additional £1bn invested in manufacturing processes, an extra 175,000 square feet of warehouse space is needed in the wider supply chain. The situation is the same across Europe – logistics providers are trying to expand their real estate portfolio to deal with increased online sales and e-Commerce fulfilment activities. At less than 5%, vacancy rates remain low, which has had a knock-on effect in terms of increased rents (over 3%).